Tesla Soars as Musk Vows To ‘Accelerate’ Launch of New Models | The Pulse with Francine Lacqua 04/24

Tesla Soars as Musk Vows To ‘Accelerate’ Launch of New Models | The Pulse with Francine Lacqua 04/24

Newsmakers and Market Movers.
This is the pulse with friends who love.
Well, good morning, everyone, and
welcome to the Pulse on Francine Lacqua
here London with the conversations that
matter.
And here’s what’s coming up on today’s
program.
Tesla shines as it speeds up the plan
for cheaper cars, while investors
overlook a big miss on earnings.
Carrying shares tumble after the luxury
group warns profit will plunge as a
crisis at its biggest brand, Gucci
deepens Pause.
President Biden says fresh U.S.
military aid will start flowing to
Ukraine within days after the Senate
passes a long delayed aid package.
That.
Good morning, everyone.
First thing is first, we have some
germany april ifo business confidence
index a bit better than expected, 89.4.
The estimate was 88.8.
Now, the other big story, of course, of
the day is some of the European stock
rally that we’ve seen yesterday
following, you know, faltering a touch.
Actually, we’ve had some pretty mixed
earnings.
And this is, for example, from the
banking world.
And the luxury sector offset some of the
further gains for technology stocks.
The technology’s doing quite well.
We’ve had some U.S.
tech giants certainly yesterday.
We’ve seen weakness in measures of
business activity for the world’s
largest economy, but that’s also keeping
alive forecasts for Fed policy easing
this year.
So I have to say the whole cross as it
is a little bit complex because there’s
always nuances to what the Fed does.
The ten year Treasury yield ticking
higher.
A gauge of the dollar was actually
steady, but there was also this two year
auction, which we look at very closely
here on the pulse.
And that’s actually what okay, 49393 is
where we’re at and can see Eurodollar
10691.
Now that Ifo business confidence
actually coming in a touch better than
expected 89.4 instead of the estimate
88.8.
And then the big, big big story among
some of the corporates and some of the
earnings is Tesla pre market.
We’re just getting that of course open
and it’s gaining some 12% pre-market.
We did also have a great Bloomberg story
on Monday that really hit the nail on
the head on exactly what we thought and
our reporters on the ground thought
Tesla would do.
So we had much more of an insight from
Elon Musk yesterday as they reported
earnings.
So for all for actually a lot more on
Tesla getting some 12%.
So let’s get straight to our auto czar.
He’s Craig Trudell.
He oversees automakers across the globe
for us.
So, Craig, thank you so much for joining
us.
That first of all, I mean Bloomberg and,
you know, under your team and your
leadership basically did this wonderful
story, the big take that kind of had
understood that what Elon Musk wanted to
try and do is get some really cool like
engines and put them in their
bestselling models.
Is that what we found out yesterday?
Yeah.
So to to kind of go back, this company
got everybody excited about this idea of
a $25,000 car late, late next year or
late next year.
Yeah.
Then kind of freaked everybody out by
giving every indication that that was
actually not the plan.
Last night, Musk gave every indication
that Ed Lobo and Dana Hall’s reporting
that what they’re going to do is take
some of the development work toward what
was going to be that $25,000 car and
apply it to their existing lineup.
And that means getting cheaper cars to
to market faster, de-risking that plan a
little bit so it’s less CapEx intensive.
And, you know, whenever you bring
entirely new cars to market, it’s a high
risk proposition.
It means you’re probably going to have
to take some downtime.
He gave every indication last night that
they’re going to take this sort of go
between strategy to get something to
market, maybe even as soon as late this
year.
And, Craig, the fact is that actually
analysts like the fact that Tesla is
trying to accelerate the launch of this
less expensive cars.
Right.
Because they really disappoint in the
previous quarter.
Let’s listen to what Elon Musk had to
say on the call with analysts.
We’ve updated our future vehicle lineup
to accelerate the launch of new models.
I had previously mentioned star
production in the second half of of
2025.
So we expect it to be more like the
early 2025, if not late this year.
These new vehicles, including more
affordable models, will use aspects of
the next generation platform as well as
aspects of our current platforms, and
we’ll be able to produce along the same
manufacturing lines as our current
vehicle lineup.
Again on the back of that.
So Tesla is up quite significantly, you
know, pre-market because of the speed
rollout.
Is there worried are you worried that he
disappoints on on the timing of it?
I think we do have to be really careful
in that Iran time is not always actual
time.
Right.
So he often sort of over promises and
under delivers.
But I do think that, you know, it does
make some sense after the absolute
battering that the stock has taken,
particularly just in the last few weeks,
that this plan to bring cheaper cars to
market you know, gives people a little
bit more confidence with this idea of,
okay, maybe this is a company that can
can grow again.
And I think his outlook for for the year
his referring to the.
Yeah.
That he does expect to sell more
electric cars this year than last year.
Also put people at ease because people
started to have real doubts after the
rough first quarter that they had.
So what are you watching for next?
Again, you know, this lower priced car
could certainly help sales.
Do you watch for the first sale or
actually the first making of the car?
I think we need indications that that
optimism about sales going up this year
is actually warranted because for all of
the happy talk and the excitement about
last night’s call, the earnings were
abysmal.
They had more than $2.5 billion in
negative free cash flow.
That’s the most ever.
Revenue came short of estimates.
Earnings came short of estimates.
So under the hood, the company is not
performing well.
Okay, Craig, thanks so much.
Always interesting to see that there’s
always some surprise around the market
getting some 12% for Tesla.
Bloomberg’s Craig Trudell there.
Now, we also had some latest German Ifo
business confidence index rising more
than expected than economists had
expected in April.
Now I’m delighted to be joined by
Clémence.
First, he’s the president of the Ifo
Institute.
Mr.
First, as always, thank you so much for
talking to us.
Now, the Bundesbank actually thinks that
the economy probably grew in the first
quarter.
Germany, once again, would be dodging a
recession in that scenario.
Are you confident that the turnaround is
now here for good?
Well, I think the first quarter didn’t
go great, but what we now see is an
improvement.
Yes.
And in a way, it’s a divided
improvement.
It’s mostly coming from services.
We also see good data from retail in
industry.
In contrast, the situation is bad and
continues to be bad.
So those manufacturing companies are
telling us they are lacking orders.
Construction is also flat, not going
well, but at least we have this positive
impact of more consumption and that
helps.
Yes, I was going to say, actually, you
know, consumers, I guess, have been for
a long time expect to drive the
recovery, but have been quite hesitant
with this renewed optimism that you have
on consumption.
Are you confident that that will pick
up, that that’s really turned the
corner?
But it looks like it’s picking up.
We had expected it to pick up earlier,
but this is something that may lead us
to growth in the second quarter, I would
say.
I think the for the first quarter, that
won’t help any more.
But for the second quarter, I am more
optimistic and it’s consumers that are
driving this.
Incomes are rising more quickly than
inflation because inflation is going
down.
So what we’ve been waiting for, in a
way, it looks like it’s coming.
There’s quite a difference between
services and manufacturing.
So manufacturing, weak services doing
quite well.
Do you expect to catch up soon?
At some point.
Yes, but we don’t see this catch up.
We see an improving worldwide economy.
But this doesn’t seem to reach German
manufacturing, which is puzzling in a
way.
Of course, there are issues in Germany,
high taxes, concerns about
protectionism.
A lot of German companies are investing,
but they are investing abroad, not in
Germany, because they want to be present
in markets and maybe jump over
protectionism and tariffs and produce
closer to consumers.
This is no good news for Germany as a
location for manufacturing firms, and we
don’t see the recovery there yet.
It’ll hopefully be coming, but that may
take some time.
Mr.
Frist, overall, Germany still performing
much worse or at least worse than than
other European countries.
Is there still a chance that this
economy catches up?
I think what we’re seeing at the moment
confirms the forecasts which are saying
growth will be weak in Germany, but at
least it won’t be negative.
So this is the stabilization we
expected.
It’s not a complete recovery, but at
least it’s a start.
What’s your take on geopolitics right
now?
I know it’s the impossible question to
answer, but how much will that weigh on
German growth?
I think it’s one of the factors really
weighing on German growth because
Germany is is an exporter and exporting
is getting more difficult.
And that’s why we see companies
investing more in in what used to be the
destination of German exports.
So that’s investment in the US that
really is an issue.
At the same time, Germany is trying,
despite the tensions, Germany is trying
to maintain trade relations.
Chancellor Charles just traveled to
China and there were a lot of people
from companies, from industry
accompanying him.
He has been criticized for that because
people say we need to de-risk in China.
But at the same time, I think it does
make sense for Germany to try and
maintain trade relations.
And that’s what going what’s going on.
Unfortunately, new trade agreements, for
instance, with Mercosur are slow, and
that’s another problem for the German
economy.
Germany has a strong interest to to come
to new trade agreements, and that’s
going very slow at the EU level.
So
what will happen there, whether we in
the end to achieve these trade
agreements will be very important,
especially for German companies.
And Mr.
Foster, how much do you worry about
inflation picking up again so the ECB
not cutting rates and that weighing on
the economy?
I don’t expect the ECB to maintain
rates.
I really expect them to cut rates.
Yes, there may be pressures coming from
the service sector because wages are
rising.
But at the same time, the economy
overall in the eurozone is not strong
enough, in my view, to produce another
increase in inflation.
That would be different if there was
another crisis in the Middle East, for
instance, and oil prices were rising.
But as long as that doesn’t happen, I
think there is no danger that the ECB
will call off the interest rate cuts
everybody’s expecting.
So I think that that will come and I do
think inflation will continue to go
down.
Okay, Mr.
Phillips, thank you so much for joining
us today.
That was Clemens first, the president of
the Evil Institute.
Now, coming up, we also take a closer
look at how Mega-cap earnings are
driving market sentiment with Goldman
Sachs senior strategist Sharon Bell.
That’s next.
And this is Bloomberg.
Well, European stocks are steady as a
rally in tech stocks was offset by a
post-earnings pullback in Kerry and
luxury stocks.
Let’s get more from Goldman Sachs senior
strategist Sharon Bell.
Sharon, thank you so much for joining
us.
I mean, you’re always so good at, you
know, putting together all these
different strands of some of the market
pressures.
Some will support valuations.
A lot of it is now in the companies, but
we can’t also forget the macro.
Yeah.
So your research at the moment is
focusing really on different valuations
depending on the region right now.
Yeah, I mean, we feel that the gap in
valuation between the US and Europe,
which has always existed in the US
equity markets by expensive, it’s
performed extremely well in the last
decade, really very consistently.
But the gap in valuation between the two
is very large at the moment.
And as we heard just now, the Ifo survey
has been a little bit better in Germany.
Some of that data’s improving very, very
modestly, and that should help not close
the gap, far from it, but certainly
narrow it a little bit.
But I was looking at some research, like
if you look at S&P, you know, earnings
expectations, they just keep on rising.
Is there an end to how much some of
these companies can grow?
I think the US is growing fast.
I totally agree.
And you see that for the economy you’re
probably going to get first quarter GDP
around 3%.
So fast pace of growth.
Western Europe will be lucky to get
above zero.
Hopefully it will be above zero in the
first quarter.
But I guess it’s a case of what’s in the
price.
And already US companies are highly
valued for that growth.
And I would say if you look at earnings
growth year on year, it is decelerating
compared to where we were at the very
end of last year for US stocks.
Do you worry that that the markets are
discounting any kind of, you know,
geopolitics event because of inflation
that could even force the ECB not to or,
you know, do one cut and then be done?
Yes.
I mean, I think I perhaps everyone’s
pushed out their expectations for when
the Fed might start cutting rates.
We have ourselves a little bit and there
is, of course, a risk that they don’t
even cut this year, as some people have
even discussed a hike, not all view.
So, of course, I think from an equity
perspective, it’s not for all bad
reasons.
It’s because growth has been good
largely, but also inflation has been a
bit sticky.
And to your point, as well as inflation
being sticky because of higher wages and
higher services spend, etc., you’ve also
got the additional issue that if
commodity prices have been rising
because of geopolitical risk or supply
constraints, that gives us another kick
to inflation, which won’t be helpful
either.
But I feel in Europe the disinflationary
trend from very low growth we’ve had in
the last few quarters is still very much
there.
Gas prices have risen, but they’re still
so far from their peak, the storage
levels are good, etc..
Europe shouldn’t have the crisis that it
did last time.
I mean, there was a couple of market
movements that, again, we’re trying to
get our head around like what’s
happening with gold, which is just
behaving differently to everything it’s
done in the past.
Is there something I mean, is this a
play on liquidity?
Is it something else in the market?
I mean, we think that there’s a lot of
reasons why people want to diversify
their exposure, let’s say, And gold is a
nice asset to diversify.
You mentioned geopolitical risk, which
is almost top of mind for every investor
that I speak to.
It’s one of the first things they talk
about.
So you worried about geopolitical risk?
Gold is seen as a bit of a hedge, so
maybe commodities and other assets like
the dollar, which has also been doing
well.
So gold, I think, is one beneficiary of
that.
But also, I think you’ve started to see
more central bank buying of gold.
You’ve seen more buying generally of
gold as people are worried about maybe
sanctions, maybe geopolitical risk,
maybe too much exposure to the dollar.
Lots of reasons.
I think that people wanted to diversify
away from just one
one.
It’s a risk free asset, but one asset
provides you with a little bit of a
hedge against some of these global
risks.
Amongst your notes, and I love some of
the strategy reports that you put out.
So you say, you know, buyback bonanza,
yields are returning and it’s very clear
that it’s bank and some of the energy
stocks that have been giving back
dividends.
I mean, is this how do you play those
sectors that just have been very, very
good to investors?
Well, you know, this is this is in some
ways this argument, again, of the gap
between the US and Europe.
Many European companies are super cheap.
They are super cheap, so much so that
these companies making good earnings
like the energy stocks or the banks are
saying we’re making good earnings, good
cash flow, we are super cheap.
We don’t have a very structured balance
sheet.
You know what we’re going to do?
We’re going to buy back shares.
They’ve been buying back shares actually
are basket of companies which buyback
shares the most has been doing super
well.
So I do think there are I think there’s
a lot of people are being concentrated
in, say, the Magnificent Seven, the big
cap tech stocks in the US.
And they have done really well and
they’ve got the growth story, as you
point out.
But I think there are other stories out
there, too, including the fact that
European companies for many years didn’t
do buybacks and now say actually with
this excess cash, we know all stock is
cheap, going to buy back shares.
Luxury did extremely well in Europe and
you have some big players and now get
getting I guess repriced.
Is this a wider concern for the sector.
I don’t I would say with luxury that
it’s been very mixed.
There have been some real losers, that
there have been companies that that
maybe they’re losing market share is my
feel.
Rather than using a collapse in demand
generally for luxury.
I mean, we know the wealth of the
highest income, wealthiest globally has
actually been reasonably strong over
this last year.
You see this in asset prices doing very
well, as you point out.
So to us, you’re not seeing luxury
demand collapse.
It’s more reshaping of who’s doing well
and who’s doing less well.
Also, the Chinese traveller is
definitely around.
They’re travelling again and they buy
lots of luxury products.
You’re not necessarily seeing them
bought in China itself, but you can see
them buy in the rest of Asia in
particular.
So to us, actually it’s more that rather
than a wholesale decline in luxury
demand.
So interesting share.
And thanks so much, Darren Bell from
Goldman Sachs.
Stays with us.
And we’ll talk a little bit maybe about
Dollar Dynamics up next.
This is Bloomberg.
Welcome back to The Pulse, everyone,
that we’re back with, Sean Bell, Goldman
Sachs senior strategist.
Sharon, thank you so much for sticking
around.
We’re talking about some of the
earnings, some of where you see the
biggest value in terms of industry
groups.
Now, How problematic is it?
Stronger dollar for the rest of the
world?
I think for Europe, if I’m if I’m
thinking about European equities and
earnings, actually the stronger dollar
is a good thing.
A lot of European companies have dollar
earnings,
and a stronger dollar means when they
translate that back into euros or
sterling, actually it looks quite good.
So a stronger dollar is definitely not
unhealthy for European companies
earnings.
If anything, I would say it is a bit of
a a tailwind for them.
And that being said, you’ve got to also
think about the reasons for the stronger
dollar.
To the extent that it’s stronger US
economic growth, that’s fine obviously
for the rest of the world because you
benefit from that stronger growth.
Lots of companies sell into the US, but
to the extent the stronger dollar is
because of geopolitical risks or some
other constraint, then absolutely that’s
not such a good thing for the rest of
world.
And I think it’s a little bit mixed at
the moment.
Okay.
So I mean, I know it’s impossible to
quantify like 20% because of geopolitics
and the rest because of the stronger
economy.
There’s also a worry that actually the
US economy is overheating.
Yet I guess also that pushing out the
Fed.
So rate expectations as well, all of
those things pushing up the dollar.
So it’s a little bit of a mixed bag.
But on balance, and particularly for
earnings, I would say for European
companies as well, that reporting euros
and sterling is actually going to be a
bit of a tailwind here.
And I have a million questions on I will
drive our economies on the price of oil
on China.
What’s the question that you think is
more important right now that investors
need to ask themselves?
Oh, that’s a great question.
Look, I think, again, if I’m thinking
about European equities, I would say
whether we actually genuine get to turn
in growth.
And I link this back to the conversation
you just had on the Ifo data.
We have seen that improve, which is
fantastic.
And that Pimeyes that we had yesterday
also showed improvement.
They were mixed.
The manufacturing side of the economy
still super weak.
The services and consumer side
absolutely clear from the data that is
improving as inflation comes down and
real incomes improve and employment is
good.
So that’s great.
But will we see that movement up in
manufacturing broaden out?
Yes.
The US economy has been strong, but most
of the places have been weak.
So broadening of growth and particularly
to manufacturing is important.
So, so good.
Thank you so much, Sharon.
Sharon, brother at Goldman Sachs, senior
strategist.
Now coming up, President Biden is
expected to sign a long delayed aid
package into law today, clearing the way
for resumed weapons shipments to Ukraine
actually this week.
Details next.
And this is Bloomberg.
Tesla soars premarket as it speeds up
the plan for cheaper cars.
Investors overlook a big miss on
earnings while carrying shares tumble
after the luxury group warns profit will
plunge as a crisis at its biggest brand,
Gucci deepens.
President Biden says fresh U.S.
military aid will start flowing to
Ukraine within days after the Senate
passes a long delayed aid package.
Well, good morning, everyone, and
welcome to The Pulse.
I’m Francine Lacqua here in London.
Now.
We had a terrific debrief by Craig’s
widow on exactly what’s going on in
Tesla.
I would suggest everyone go back and
read.
Also a big take from Monday that was
kind of spot on on what Elon Musk was
trying to do.
Now at Tesla, soaring almost 11%,
pre-market after pledging to speed up
the launch of their more affordable
models.
Again, the first quarter profit and
sales actually missed, but the maker
plans to release a cheaper cars as soon
as this year.
And that’s frankly well ahead of its
previous late 2025 timing.
This actually gave a lot of optimism to
analysts out there.
You can see Tesla gaining 10.3%.
Now, a couple of other things we’re
watching out for is some of the banks we
were hearing there from Sharon Bell, of
course, from Goldman Sachs, that this is
one of the things that they’re looking
for and they’re looking at in how much
banks are also giving back to
shareholders.
So if you look at the equity complex
here in Europe, it’s definitely banks
and energy that have been quite cash
rich and have been able to give back
probably the most.
Now some breaking news we have also from
UBS just coming out on the Bloomberg
terminal, UBS saying they are seriously
concerned about some of the Swiss
capital proposals.
Now, we have been bring you up to date
with the fact that the SNB has raised
the requirement reserves for banks to
reduce payouts.
Now, this happened a couple of days ago.
So this is actually the first time that
UBS is coming out with a statement on
these new capital proposals saying that
they are seriously concerned.
So we’ll continue looking at this very,
very closely.
It was just a couple of days ago that
the S&P said they would require banks to
hold more money at the institution.
Again, a move that will cut how much
interest interest it actually pays to
them on onto politics.
And the US President Joe Biden is
expected to sign a long delayed $95
billion emergency aid package for
Ukraine, Israel and Taiwan into law as
soon as today.
It clears the way for resumed shipments
of weapons to Ukraine this week.
Now let’s get more from our Bloomberg
Markets today, anchor Chris Gupta.
So, Chris, I mean, this was, you know,
very welcome news, certainly from
Europe.
What can Ukraine expect in terms of
actual shipments?
Yeah, let’s talk about kind of where the
money actually goes here.
A lot of this is the air defense systems
and this is really important terms of
drone warfare.
We cover that quite a bit in terms of
what’s going on, in terms of ground day
to day movements between Ukrainian and
Russian forces.
So about $14 billion out of the 61 total
is going just those U.S.
defense systems.
So the idea here simply we have the
machinery that attacks those attacks,
radar systems, etc., Then you have about
13 billion going to actual stockpile
replenishment.
That’s ammunition, that’s firearms,
etc., 7 billion for about U.S.
operations there.
And then I think the key part here is a
nine and a half billion dollars in
forgivable loans.
And this is crucial because this was
originally a President Trump kind of
idea that was then tacked on to this
bill.
The idea here simply being that
ultimately this is more economic
assistance as opposed to defense
assistance that would go in other places
of the Ukrainian economy.
The assumption here is that if President
Biden comes to a second term, he will
forgive those loans.
If President Trump does, they will not.
So there was quite a lot in the bill,
including sanctions against Iran.
What are the implications of those?
Yeah, the broader sanctions are
interesting here because of the
sanctions on Iran for a very long time.
And a lot of people have said it’s not
about the sanctions, it’s is about the
enforcement of the sanctions.
And that’s where the nitty gritty of the
fine print really comes in handy,
because this isn’t just oil or ports or
vessels or even some of the refineries
that Iran operates.
It’s the infrastructure, the financial
infrastructure, a lot of which is kind
of built and operated by the Chinese.
That is getting targeted.
Now, in terms of the actual oil price
here, I think that’s what everyone wants
to hear, is that geopolitical premium
people are saying about 2 to $3 a
barrel.
That’s the call, at least from Eurasia
Group added on to about $90 a barrel if
big if there that stricter enforcement
actually comes through.
Have your boss of Bloomberg opinion
saying that’s been issue for a while and
he’d be surprised if it actually did and
then take off feeling the fury of the
U.S..
Yes, even more, China’s read through
again.
You can kind of see a theme in all of
this show up.
The divestiture has been on on the kind
of playbook and on the agenda for a very
long time now that’s getting signed into
law.
There’s a very long legal battle ahead
of us.
Remember, the last couple of years,
we’ve had tick tock removed from the App
store, removed from Android, then
brought back on because of those kind of
competition questions as well.
Now, tick tock, Bytedance by extension,
really gearing up for a long legal
battle, kind of putting their boxing
gloves on, saying this is not only
unfair to Chinese businesses, but
ultimately on constitution.
Because so many people, even Americans,
have been lobbying for easier access on
TikTok, given it’s a way to actually
make money for things like influencers,
for example.
Yeah, I mean, such a great roundup of a
very important bill.
Thank you so much.
Kriti Gupta Bloomberg Markets today.
Anchor Now, this was supposed to be the
year that Vietnam reaped the benefits
from its largest natural gas discovery
in the South China Sea.
On the other side of the disputed
waters, the Philippines has long eyed
the energy riches of its northern coast
as a way to reduce its reliance on
imported gas and oil.
But neither country has benefited as
Beijing continues to claim the territory
and tensions rise.
These two ships are from the Chinese
Coast Guard and the ship they’re
targeting with high powered water
cannons is a Philippine supply vessel.
We’ve been here for almost 3 hours and
the situation has gotten more tense.
An international court says the
Philippines has the right to extract
resources in these waters.
Since the threat has grown, we must do
more to defend our territory.
China doesn’t see it that way.
And if they want to enter the challenge
in total jungle hygiene overtake
buildings, you’ve got to shoot.
It’s the sixth time in eight months this
kind of incident has happened and it’s a
growing problem for the world.
The US and the Philippines have a mutual
defense treaty dating back to 1951, and
the circumstances that may trigger U.S.
involvement have become more clear
recently.
Southeast Asian leaders are anxious over
the prospect of a war between the U.S.
and China, two partners that they depend
on dearly, whether it be over Taiwan or
in the South China Sea.
Second, Thomas Shoal is the most
dangerous flashpoint today.
This is truly a crisis waiting to
happen.
China and the Philippines have wrangled
over control of these waters for
decades.
But in the past year, tensions are close
to the highest they’ve ever been.
Well, Bloomberg Originals are taking a
closer look at the escalating tensions
in the South China Sea.
It’s also the topic of today’s big take
now.
The South China Sea and global defense
more broadly is high on the agenda as
the US Secretary of State, Antony
Blinken, travels to China today.
So let’s bring in Bloomberg’s news
director for the EMEA region, Rosalind
Matheson.
Ross.
I’m really happy to speak to you today
because there’s there’s a lot of big but
also little concerns around the world.
And I don’t know whether there’s a
common thread, there’s a common thread,
just more risk appetite for geopolitics
or is it China trying to influence
corners that in the past they hadn’t?
Well, the common thread really is that
we’re moving from a world where the US
was the single dominant power globally
to a multi-polar world where you’ve got
not just China, but Russia, you’ve got
middle powers in the Middle East rising.
You’ve even got countries like South
Africa suddenly more assertive in
foreign policy.
And so it’s a long running trend that
we’re seeing where the US arguably is
retrenching in certain parts of the
world, and that’s bringing tensions, as
is the case between the US and China,
particularly in the tensions in the
South China Sea.
They’ve been bubbling for decades.
But what’s happened is that China has
really had the advantage and now we’re
seeing that bear fruit.
So many, many years ago, China started
repurposing these reefs, these shoals in
the South China Sea and turning them
essentially into military bases, using
their coast.
They’ve been using their Coast Guard to
scuffle with the Vietnamese and the
Philippine military for years now.
But it’s really escalating to the point
where they’re stopping these countries
around energy resources in the region.
They’re sort of essentially changing the
status quo in the South China Sea.
And that’s part of the broader thing
that we’re seeing globally.
Again, with different countries emerging
as powers in the US, some would argue in
decline.
ROSE When you look at, you know, non
friendly US countries, so I’m thinking
of Iran, Russia, China or they’re biding
their time in case Trump comes in the
White House or do they have a window of
opportunity to kind of, you know,
inflict, you know, chaos or doubts from
now until the US election?
Well, you can see on the part of the US
administration that Joe Biden is trying
to break stuff in now in terms of law
and behavior, just in case it is another
Donald Trump administration.
You can see countries like in Europe and
elsewhere preparing for that
eventuality.
You talk about the future of NATO, for
example, and that’s going to be very
uncertain if Donald Trump comes back to
the White House.
But you can also see that China likes to
play both the show in the long game.
So you’ve got a short game going, which
is to get themselves in the best
position for a future US President Joe
Biden again or Donald Trump.
But China, like Russia and others,
arguably play the long game too.
China’s thinking in the ten, 20, 30 year
horizon about where they see themselves
economically, strategically, geo
strategically in the region, and they’re
looking through the US administrations
in a way beyond who’s just in power in
that minute, what’s their long term
goal?
And that’s the way the US in turn
probably needs to be viewing its
behavior with China.
What’s your take on Ukraine right now
with this extra help and the extra bill,
even if we have, you know, help that
comes this week, can they really longer
term win the war?
Well, that’s a big question.
I mean, obviously any military aid is
useful and important, however late it
comes and some is is really needed from
everything from ammunition to artillery
to air defense.
And that’s also coming.
It could come pretty quickly at this
point.
But is it a point where Ukraine needs to
regain momentum?
And that’s always difficult when you’re
behind and you need to recover.
And Russia’s got the momentum at the
moment.
And then beyond this aid package,
anything further is going to be very,
very difficult given the political
climate in the US.
So if this was hot enough, imagine
further big packages getting stuck in
Congress forever.
And Donald Trump again, if he wins the
election, he’s made clear he doesn’t see
the need to continue to supply Ukraine
with aid.
So this may help Ukraine in the short
term, but in the longer term, there’s
big questions about where this war is
going.
What’s thank you so much as always for
for really terrific insight.
Roslyn Mathison there.
Now coming up, we talk luxury and
caring.
Shares hit a six year low after first
half profit warning as Gucci sales
falter.
We’ll talk luxury next.
And this is Bloomberg.
Well, the next episode of Leaders with
Luke was an extremely rare interview
with the chief executive of Chanel, one
of the most exclusive luxury brands in
the world.
The chief executive, Legionnaire, spent
decades at Unilever before switching
from the world, fast moving consumer
goods to haute couture and beauty.
Now she spoke to us about the company’s
plans to continue investing in China and
the strategy behind recent price hikes.
So we raise our prices according to the
inflation that we see sort of really
linked to the cost price.
We’ve also made a commitment to price
harmonisation across the world, which
means our clients should not experience
excessive price differentials.
No price differentials, no matter where
they buy.
How do you see the China market right
now compared to the US market?
Because it’s not it’s not that volatile
actually.
You kind of have like a base that stays
for for quite some time.
China is a very central market for the
luxury eco system because of the fast
adoption of luxury, because of the
appreciation of refinement and
sophistication.
So it’s a very important, essential
market for us.
I came back recently from China and I
was really happy to see the energy and
vibrancy in the market.
So we continue to run our business for
the long term and continue to invest in
China for the long term.
And you can see that full interview with
the Chanel chief executive on leaders
was like what?
9:30 p.m.
this evening in New York?
He premiers at that time and then
tomorrow 6:30 p.m.
in London.
Now on to more luxury and caring, a
warning that profit will plunge in the
first half of the year after wealthy
shoppers curbed spending on Gucci
products.
Now, comparable sales at Gucci actually
tumbled 18% in the first quarter and
slower demand in China.
Well, joining us now is Andrew Felstead
from Bloomberg Opinion.
Andrew, you have the pulse, of course,
of the luxury world.
So are other companies going to be
concerned about what’s happening at
Gucci or is it just a Gucci problem for
carrying?
I think it’s a bit of both.
I think this is largely Gucci focused,
Gucci bound bright for a long time and
then went out of fashion and carrying is
really struggling to get that momentum
back, saying that there are some reach
across perhaps for those brands like
Gucci, that in a turnaround phase such
as Burberry.
I mean, I guess the concern is that
Gucci is such a high percentage of the
sales for Kerry.
Is it similar to what we were toys for,
LVMH?
Yes, indeed.
It’s you know, they’re both key brands
for for the two groups.
And I would say carrying is, you know,
particularly dominant, you know,
dominated by Gucci.
The other houses big enough to to change
the fortune.
So what’s the secret sauce of being so
big and still so successful?
I mean, Alessandra Micheli with his
vision of like opulence, and there was
gold and there was velvet, and it kind
of went back to the archives and really
well for a moment, and then it kind of
went on to quiet luxury.
And so people lost interest.
How do you do?
It doesn’t matter what the prevailing
look is at the time.
It’s all about brand desirability.
If if you can, you know, really
encourage people to just really want the
products, you know, they’re prepared to
eat beans on toast for a month so that
they can buy that handbag.
That’s the secret.
So you said handbag.
And I was wondering actually whether it
does whether leather goods is are easier
to sell, especially in a downturn than
clothes.
That was always theory, that leather
goods were more resilient than other
products, but I’m not sure that is still
the case given the price hikes that
we’ve had.
The theory is that, you know, products
are maybe jewelry is attractive at the
moment because leather goods have gone
up so much rather than by handbag.
Perhaps you buy a Cartier bracelet or a
Van Cleef necklace.
So that theory is really being tested
this time round.
Andrea, as always, thank you so much for
joining us.
Andrea Foster there from Bloomberg
Opinion.
Coming up, a Boeing prepares to release
earnings with analysts watching for cash
outflow in the wake of its mach seven
crisis.
More on that next.
And this is Bloomberg.
Now, Boeing’s cash outflows will be in
focus when it reports earnings later
today.
The PLANEMAKER is engulfed in a crisis
involving its main source of revenue,
the 737 max.
So.
For more on all of this, let’s get
straight to bloomberg’s charlotte ryan.
Charlie.
So good to see you on tv.
So investors what are investors looking
out for in these results?
Yeah so in focus from the investor side,
obviously the numbers we’re expecting
the company to make a loss given
everything that’s been going on and the
fact that they’ve had a cap on their
production from the regulator, which is
obviously limiting how many planes they
can get out the door.
On the cost side, they’re expected to
burn somewhere between four and four and
a half billion.
So anything over that, obviously bad
news, it’s from the analysts I’ve spoken
to, is expected to be over rather than
under again, given everything going on.
And then the other key thing will just
be any kind of guidance about where
Boeing goes from here.
You know, how long do they expect backup
and production to last?
Where are they in the search for the new
CEO?
Lot different things going on at the
moment.
So there will be plenty for investors to
ask them about.
What have investors actually regulators
done so far?
Yes.
So the regulators have been pretty
active on this one.
I think the FAA is kind of anxious to
shake off that reputation of being a bit
too cozy with Boeing that they’ve been
accused of in the past.
So they’ve imposed this production cap.
That means Boeing can’t go above 38, 77
maxs a month, and they’ve not really
given any timeline for lifting that.
That’s kind of to be decided.
And then they’ve also, at the end of
February, giving given Boeing 90 days to
sort out its quality control lapses.
That deadline coming up at the end of
May.
What’s not clear is what happens if they
haven’t started things by then.
But there’s definitely kind of a sense
of a more active regulator that is
stepping in with this company.
And then, I mean, is there anything that
Boeing can, you know, at this point can
do to address the issue?
They’ve they’ve done quite like there’s
a change in leadership, but not until
later this year.
Yeah.
So they have made some big moves.
You know, they’ve they’ve changed the
leadership.
The CEO is not leaving until the end of
the year, but they have already changed
the head of the commercial aircraft
business.
And what we’re hearing from airlines is
that’s been seen as quite positive
change.
So that’s something that seems to have
gone well so far.
But other than that, it’s obviously it’s
just about kind of showing, you know,
the market, showing regulators, showing
customers and people who are going to
get on these planes that you’re taking
this seriously, you’re taking steps to
change things.
So I think a lot of it will be about
that.
Thank you so much for that reminder of
the very latest on Boeing now.
Don’t miss our our interview actually
with the chief executive of Airbus for
tomorrow.
And then in the next hour, we’ll also
hear from the chief executive of
Ryanair, Michael O’Leary.
So earnings season well underway with
another magnificent seven megacap due to
report later today.
In other companies, generative AI tools
are expected to continue strengthening
its positioning.
Let’s get more with Bloomberg’s Alex
Webb.
Alex, we had Tesla yesterday and there’s
a lot more coming up.
So what are you focused on?
Well, matters really interesting because
they the expectations actually of matter
are remarkably high.
They had their year of efficiency that
have therefore reduced costs a lot.
They did lay off quite a lot of people.
There also seems to be a focus on that,
not just in the general sense, but they
have a lot of people working.
People are realizing actually those
people are often working on the outs
products and that apps product seems to
be doing quite well.
Oh, excuse me.
The street’s looking for something like
a 50% increase in operating profit and a
26% increase in revenue.
That’s sort of numbers that we’re used
to from Facebook.
A few years ago, people didn’t
necessarily think that that was going to
be the case again.
So there’s a lot of optimism.
That, of course, does mean that if
there’s any any sort of any missing of
those numbers, then they could be
punished given the way the stock has
risen this year.
So who’s more interesting, better or IBM
or anything?
I mean, they’re different, more
interesting.
But look, IBM is interesting in a
different sense because it is more sort
of in the weeds of what other companies
are doing in particularly if they are
taking on some of IBM’s tools, helping
them, their businesses migrate to, you
know, cloud based AI.
IBM is a company that they could be
using to do that.
So we’ve seen a lot of the investment in
AI tools in the cloud from the big
Hyperscalers, the Microsofts, Googles,
Amazons of the world.
That might be some indication from IBM
of whether those tools are starting to
be used because they hire IBM to make it
happen.
What will happen to Tick Tock it’s now,
is it?
I mean, the jury is quite, quite
literally, but almost literally out
because now it will come down to the
courts.
Right.
There is going to be a big appeal for
firm from tick tock on this, largely
expected to be on the basis of free
speech and First Amendment rights.
It looks as though some meaningful
American bodies.
Get behind tech take on this, including
the ACLU that’s been mooted as a
potential ally in this case because they
think it might be a restriction on free
speech.
Nonetheless, it is passed the House.
It has passed the Senate.
This bill, of which take up was just a
small part, but a significant part.
And now it looks as if President Biden
is going to sign into law 270 days from
that happening to Bytedance, the parent
company having to either sell or either
divest or withdraw the business from the
US.
I think the big question is whether if
there is a court case, there will be a
stay on that or whether they’ll have to
do it and you have to pull out
defensively, I think most likely to be a
stay and it could be a number of years
to reach a conclusion.
Alex, thanks so much.
Alex Webber with the very latest on
something magnificent, some of these
magnificent seven companies.
And of course, tick tock now.
Tesla shares jumping as much as 11% in
pre-market trading.
This is after what Elon Musk said
yesterday.
This is Bloomberg.

The Pulse With Francine Lacqua is all about conversations with high profile guests in the beating heart of global business, economics, finance and politics. Based in London, we go wherever the story is, bringing you exclusive interviews and market-moving scoops. Today’s guests: Ifo Institute President, Clemens Fuest and Goldman Sachs Senior Strategist, Sharon Bell.
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